Brent crude climbed above $110 a barrel for the first time in six weeks on signs that the crisis in Ukraine is escalating. West Texas Intermediate gained before the release of weekly U.S. government inventory data.
Futures rose as much as 0.9 percent in London. Ukraine's government began an offensive against separatists in its east, recapturing an airport amid claims that Russian special forces were fomenting unrest. Crude supplies at Cushing, Okla., the delivery point for WTI, fell 640,000 barrels last week, the industry-funded American Petroleum Institute said yesterday. The Energy Information Administration will release data today.
“Futures are higher because the situation in Ukraine appears to be getting worse,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The big draw at Cushing in yesterday’s API report is boosting WTI. If today’s numbers are anything like the API, WTI could easily breach $105.”
Brent for June settlement rose 73 cents, or 0.7 percent, to $110.09 a barrel on the London-based ICE Futures Europe exchange at 9:33 a.m. in New York. Prices climbed above $110 for the first time since March 4. The May contract expired yesterday. The volume of all futures traded was 14 percent above the 100-day average.
WTI for May delivery advanced 83 cents, or 0.8 percent, to $104.58 a barrel on the New York Mercantile Exchange. Futures climbed to $104.99 earlier, the highest level since March 3. Volume was 27 percent above the 100-day average. The U.S. benchmark grade’s discount to Brent for the same month narrowed to $6.33 a barrel.
Ukraine’s offensive yesterday marked its first foray against armed activists holding government buildings in cities near the Russian border. Interior Ministry units ousted pro- Russian activists who had seized the airfield in Kramatorsk. Efforts to contain the insurgency risk escalating tensions with the government in Moscow, which warned of a potential civil war.
Russia has 40,000 troops massed on Ukraine's border after its annexation of Crimea last month, the North Atlantic Treaty Organization said.
U.S. crude inventories probably rose by 1.75 million barrels in the seven days ended April 11, according to the median of 10 analyst estimates in a Bloomberg survey. It would be the 12th gain in 13 weeks. Supplies climbed by 7.64 million, the API said yesterday in Washington.
Cushing supplies dropped in nine of the last 10 weekly reports from the EIA, the Energy Department's statistical arm. The weekly supply report is scheduled for release at 10:30 a.m. in Washington.
“A big nationwide build may temper the reaction to a Cushing supply decline,” Yawger said. “The focus has been on Cushing though, so it’s what I will be paying the most attention to at 10:30.”